It is not the Fintech firms rather Tech giants that is threat to banks: WEF (World economic forum) has made a startling revelation whereby the tech giants such as Facebook and Amazon are bigger threat to the banks than Fintech newbies. This revelation is backed by the WEF’s assessment that banks have long been left behind by these tech companies in the field of cloud computing artificial intelligence and big data.
March 2018, “Fintechs have changed the basis of competition in financial services, but not the competitive landscape,” Rob Galaski, co-author of the report and Canadian lead for financial services at Deloitte, said in a statement Tuesday.
“Fintechs now define the tempo and direction of innovation in financial services, but high customer switching costs and the rapid response of incumbents has challenged their ability to scale”, according to the report.
The report detailed that it is because these banks are behind in the technological front, lenders are now moving towards tech giants to provide them with services pertaining to cloud computing, artificial intelligence and big data.
According to Galaski, in this industry of financial services, the ability of the firm to morph itself to the current situation and technologies prove to be more reliable than being the first. The reason Fintech firms are not a primary threat to the incumbents is because:
- The ability of the large financial institutions to quickly adopt to the new trends
- And the inability of the young innovative start-ups to understand the underlying dynamics of the industry.
Although Fintech firms credit models and block chain (or distributed ledger technology) is used by the established financial institutions, the number of the Fintech companies don’t have marketing muscle, consumer customers and financial traction. There is no double that Fintech start-ups such as Lending Club and OnDeck are defining the lending experiences for the industry and banks are trying hard to copy their models are effectively as possible.